People demand more to give up something they own than they would pay to acquire it, because giving it up feels like a loss.
Homeowners demand prices well above market value because selling feels like a loss. Companies hold onto failing projects because abandoning them means realizing the loss of sunk investments.
The endowment effect reflects strategic bargaining—it's a genuine psychological shift in valuation based on ownership and loss aversion.
Thinking, Fast and Slow
Daniel Kahneman
Losses hurt approximately twice as much as equivalent gains feel good, making people risk-averse for gains and risk-seeking for losses.
Losses hurt approximately twice as much as equivalent gains feel good, making people risk-averse for gains and risk-seeking for losses.
Outcomes are evaluated relative to a reference point (usually the status quo) rather than in absolute terms, making framing crucial.
Continuing an endeavor because of previously invested resources (time, money, effort) that cannot be recovered, even when continuing is irrational.
Why do people demand more to sell a mug they were just given than they would pay to buy an identical mug?
How does the endowment effect relate to environment design for habits from Atomic Habits?